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Big Ambitions, Small Returns: Nuclear Development in and India

Xu Yi-hong Griffith University, Australia Introduction

Energy poses a formidable challenge to those working to achieve . We use energy to alleviate poverty, promote economic growth and foster social and development. We particularly need modern energy – and – to achieve these objectives. As more energy is consumed, stress is placed on resources and the environment at local, regional, and trans-boundary levels. “Nuclear energy,” declares Nobel prize laureate in physics, Burtons Richter, “is undergoing a renaissance driven by two very loosely coupled needs: the first for much more energy to support economic growth worldwide, and the second to mitigate global warming driven by the emission of from fossil ” (2006:5). In agreement, the International Energy Agency (IEA) has promoted an expansion of nuclear in countries where (a) energy demands grow rapidly; (b) alternative sources are scarce and expensive; and (c) a nuclear energy program is already in place (2006).

It is not surprising that China and India responded to the call quickly: both are facing the twin challenges – rising energy demand and . Nuclear energy can supplement other energy sources. It currently meets 17% of global energy need and contributes over 30% of electricity supplies in 14 countries, with France taking the (78.5%). Developing and expanding nuclear energy capacity has long been an ambition for China and India. They are seeking technological solutions to ensure energy supplies without triggering direct conflicts with other powers and to safeguard the environment without slowing socio-economic development. Nuclear energy is one of the options that can be developed to supplement - fired thermal generation and other renewable . To develop adequate nuclear energy capacity quickly enough to address the current challenges will depend more on domestic and international political than economic and engineering development.

This paper will examine the political determination of China and India to expand their nuclear energy programs and the obstacles they face to achieve this objective. The first section of this paper will provide a brief picture of nuclear energy development in both countries and minimal impacts of their nuclear energy development. The second section will offer three reasons for the political determination in China and India to expand their nuclear energy programs: (a) the desire to calm the domestic and international anxieties about and environment concerns; (b) an optimistic hope that standardized and design will speed up the expansion process; and (c) their pursuit of political prestige in the international community and a desire to lead in research and development (R&D). Finally, it will discuss some of the challenges for a rapid expansion of (NPPs): technology, finance, supplies, public acceptance and international concerns about proliferation. It concludes that (1) on all three counts – energy demands, energy security and environmental – the potential impact of nuclear energy will be minimal in China and India; and (2) despite the political, financial and technical obstacles for nuclear expansion and the minimal contribution of nuclear energy, both countries will devote financial, human and political resources to their nuclear power expansion. Its speed, however, will depend on domestic and international political development.

1 The discussion on nuclear energy is extensive but there is little room for middle-ground – people are either for or against nuclear power. The debate tends to be emotional, rather than evidence-based, as illustrated by the stir caused by the recent calls from OECD, IEA, IAEA, other international organizations and some developed countries, such as France and the US, to expand nuclear energy capacity to add to the , to reduce energy vulnerability, ease rising and volatile prices of fossil fuels and curb the speed of increase in pollution. The revival of interest in nuclear energy has made some nervous and others wary because of concerns for reactor safety, waste disposal and proliferation, and because both China and India are states and both have had a record of violating bilateral or multilateral treaties on nuclear issues (Norris 1994; Frankel 1995; Dittmer 2005). Some see this „nuclear renaissance‟ as another fad which emerges every time energy prices rise and which will evaporate soon. Some view it as „nuclear amnesia‟ because nuclear energy will never be able to meet the demand (Patterson 2006). Some simply laugh at the idea because they believe neither China nor India is able to expand its nuclear energy capacity sufficiently or quickly enough to make any difference to their demand or environment. Others ignore the supply question completely and devote their whole attention to the problems caused by the rising energy demand in China and India – skyrocketing global energy prices and worsening global environment.

Some argue we need to change our way of life because “our entire culture, indeed, our entire civilization, is locked in „fossil denial‟” – “the primary psychological symptom of addiction” (Allen 2007:61). Unless we deal with the addiction, we will never be able to come up with „right‟ solutions to the problems posed by energy security and climate change. “The economic growth in India, Asia and China has exceeded all industry speculation;” so does their (Allen 2007). These critics argue it is time for these countries to deal with the rising energy demands and the environmental problems caused by them. Yet, it is difficult to convince those without access to electricity that living in the dark is a better way of life, or that they should remain in the dark to protect the environment and ensure energy security for others. The key assumption for this paper, therefore, is that countries want to ensure sufficient supplies of electricity in a clean and sustainable way. Acknowledging that they cannot follow the development trajectory of the industrialized countries, governments in China and India are determined to leapfrog into the 21st century. Their ambition to expand their nuclear energy capacity is clearly designed to deal with the supply issues.

State of the Play

Nuclear power has been in decline among OECD countries for over 20 years while the nuclear share of world has remained remarkably constant at around 16%. While North America and Western have almost halted nuclear energy programs until very recently, the centre of of nuclear power has moved to Asia, Japan, South Korea and China and now India has promised to expand its nuclear power significantly in the next decade or so as well. The recent nuclear renaissance has caused a lot of concern, but not so much among Asian countries. The governments in Beijing and Delhi have already developed an ambitious plan for nuclear expansion. For now, however, the share of nuclear power as a total electricity generation capacity remains meagre.

Nuclear Power Capacity Reactors NPP Capacity % of generation capacity % of electricity Plan for 2020 China 9 6.6GW 1.4% 2% 40GW

2 India 17 4.1GW 3.1% 2.8% 20GW World* 441 359GW 16% 16.9% * The data for the world is 2002.

With 6.6GW nuclear power, China has only 1.8% of the world total nuclear generation capacity and India has only 1%. Despite these insignificant shares, in its 11th five-year plan (2006-2010), the Chinese government pledged to double the capacity by 2010 and rise to 40 GW by 2020, with 18GW under construction. By then the total installed generation capacity is expected to expand to 950GW and the share of nuclear power would reach 4%, far below the world‟s average. Meanwhile, to achieve the objective of 40GW nuclear capacity by 2020, China would have to build 2 or 3 nuclear units with the capacity of 1,000 MW every year for the next 15 years. The total price tag, according to some estimated, would be $50 billion or more.

In India, 17 reactors with a total installed capacity of 4.12GW were operational in 2007 and 5 reactors with additional 2.46GW capacity were under construction, constituting 3.1% of the total installed generation capacity and supplying 2.8% of India‟s electricity. Plans call for the increase of the country‟s nuclear generation capacity to 10GW by 2010 and 20GW by 2020. Construction of a prototype fast (about 500MW) began in early 2003. This reactor represents a major step forward for India‟s plan to introduce a -based cycle after its scheduled completion in 2010. Similarly, India announced that it has completed design of an Advanced Heavy Water Reactor that would use thorium and uranium as fuel and generate more uranium than it consumes. A prototype is planned with operation projected by 2011 (NEA 2005).

China and India have adopted dual strategies: expanding current nuclear capacities and pursuing more audacious courses. China plans to combine indigenous and foreign capital, technology and designs to make possible the standardization of NPPs to speed up expansion. The Indian government has adopted the Three-Stage Nuclear Power strategy focusing on developing thorium-based nuclear to reduce its reliance on uranium imports (DAE 2005). The more audacious course is to develop new technologies (such as ) and build nuclear power facilities that can better harness the atom (such as pebble-bed reactors). Both countries are participating in the most advanced research consortium on nuclear energy – ITER, formally known as the International Thermonuclear Experimental Reactor (Fiore 2006), hoping to leap-fog the fossil-fuelled West into a new stage of clean energy.

Reasons for Developing NPPs

Nuclear power is a controversial and divisive subject but there seems to be a consensus in China and India that expansion of NPPs is inevitable. One key driving force behind the nuclear energy programs in China and India is the twin challenges both countries are facing – rising energy demand, especially demands on electricity, and environmental pollution caused by thermal power plants. While the potential impact of nuclear energy expansion in China and India may be minimal, the desire to calm the domestic and international communities over the challenges is strong enough for both governments to take all kinds of actions, including expanding their nuclear capacity. More optimistic views on future nuclear development than many OECD countries are behind the ambitious nuclear programs in China

3 and India. Finally, it is the prestige that has always driven their nuclear programs (military and civilian).

First, despite impressive achievement in expanding access to electricity, China and India face rising demands on modern energy, which are inevitable with the current low electricity consumption per capita. In China, electricity consumption per capita increased fivefold from 306kwh in 1984 to 1700kwh in 2006. It remains low by international standards: 63% of the world‟s average and 19% of OECD countries. Rapid urbanization with improved living standards continues to stretch the electricity industry. Total generation capacity more than doubled, from 306GW in 2000 to 700GW in 2007. It would have to double again by 2020 for the country to achieve an average annual growth rate at 8%. Power shortages since 2002 have been frequent. They have not only affected economic growth but more importantly have created serous political problems for the government.

Electricity consumption per capita in India is currently at the level of that in 1987 in China. It is below the world‟s average (18%), lower than in China (29%) and only 5.6% of the OCED countries. Over 20% of the villages and over 45% of households nationally and 56% of households in rural areas (more than 60 million people) do not have access to electricity. Those who are connected experience frequent blackout and brown-out, even in cities, such as Delhi and Mumbai. With an average annual growth rate at 9% in GDP in the past several years, the shortage of power is apparent. In 2002-06, the average electricity shortage was over 8% and the average peaking shortage was 12.3%; it reached to 14% in 2006. Lack of adequate and reliable supplies of electricity has not only had adverse impacts on economic growth, but also challenged the legitimacy of the government. The Indian government has promised to make electricity available for all by 2012; this would require additional 100GW generation capacity (an equivalent of almost two-thirds of the current total generation capacity, which is 138.25GW).

Nuclear power is one option for the government also because of other challenges the power industry is facing. Due to the inadequate generation capacity and unreliable supply, many customers, particularly industrial facilities, have invested in small generators for on-site production of electricity. About 10% of India‟s electricity generation comes from such installations. One of the key characteristics of electricity is its large scale production – the more connected the system is, the more efficient it is (Joskow 1999, 2003; Patterson 1999). NPPs offer the opportunity to build integrated transmission networks and more efficient industry.

To meet demand, China has been building almost one power a week. In the first 9 months of 2007, for example, over 65GW capacity went into operation, 83% of it is coal- fired. One immediate consequence is already felt worldwide – coal depletion (Mowli 1996; Herberg 2004; Shalizi 2006; Tang 2006). In 2006, China‟s coal output rose by 8.1% to 2.37 billion tons, which accounts for over 44% of the world‟s total production. Since 2001 its production has doubled. In the last several years, with only 12.6% of the reserves in the world, China has contributed to 38.4% of the world‟s coal production. Coal mining has already gone much deeper into the ground. Concerns about imminent depletion are rising. For many decades, China was one of the largest coal exporting countries. In 2007, for the first time, China became a net importer of coal.

Coal is the main source of energy in India as well, contributing to about 60% of electricity generation capacity. India‟s requirements for coking coal are almost entirely fulfilled by

4 imports. Even the non-coking coal is increasingly imported to blend it with Indian high-ash coal for power generation at some coastal locations. In 2001-02, the net coal import in India was 22.8 million tons. Some predicted India might have to increase its coal import by 8-10 times by 2010 (Energy Congress 2007). As in China, increasing dependence on imports has caused serious concerns about the country‟s vulnerability to the international market. “For a large country like India, long term energy security, mainly based on indigenous resources, is an important and inevitable need, from economic as well as strategic considerations,” according to the Indian Department of Atomic Energy. The Chinese government has stated a similar view: „future depends mainly on domestic resources‟.

China and India must keep expanding generation capacity in all sources. Nuclear power is one of them. Yet, even if both countries achieve their objectives in nuclear expansion, the impact on rising demands will be minimal. Since 2000, China has added 394GW generation capacity. Following the same trend, total generation capacity would reach about 1300-1400G by 2020 and 1775GW by 2030 (IEA 2007). 40GW NPP in 2020 would account for 2.8-3%, much lower than the current world‟s average. In India, the total installed generation capacity in 2006 was 138GW. To achieve the projected economic growth at 10% a year, it will need to double the current capacity to about 270GW by 2020. Then 20GW nuclear capacity will still account for merely 7%. In neither China nor India will expansion of nuclear capacity have a corresponding impact on reducing the pressure on energy demand. As both governments stated, nuclear power is not a substitute but a supplement to other energy sources.

If additional NPPs are promoted as a way to reduce import dependence, their impact would be equally minimal. Neither country currently depends heavily on oil and to generate electricity; nor do they have sufficient uranium for nuclear expansion. In China, less than 4% of electricity is generated by oil and gas. In India, 15% of electricity is generated by oil (5.4%) and gas (9.5%). Gas is predominantly from domestic sources. NPPs can help reduce oil consumption in both countries, but only indirectly. That is, shifting from coal to nuclear might reduce the pressure on transportation and therefore consumption of oil. Even with reductions in oil consumption, the impacts might not be significant because most coal is transported by rail. Therefore, closing down all oil and gas-generated facilities and replacing these facilities with NPPs would have limited impact on their import dependence. Indeed, an expansion of NPPs will inevitably increase their imports of uranium because both countries have limited uranium reserves. Diversifying dependence does not necessarily mean energy security.

Second, China and India need to address environmental problems caused by burning coal. At the Johannesburg Earth Summit in 2002, India confirmed its commitment to nuclear power as an essential element of its sustainable development strategy. “Burning coal contributes to 90% of the national total sulphur dioxide (SO2) emissions, about 70% of the national total dust, nitrogen oxide (NOx) emissions and (CO2) emissions” (Zhang 2007:3547). China is hosting 16 of the most polluted cities on the planet and over 70% of is caused by burning coal for power generation. Three impacts are immediate: (1) high human cost: it is estimated in China every year 400,000 people die because of direct impact of pollution. According to the State Environmental Protection Agency, over 70% of the country‟s river systems are badly polluted, over 300 million people do not have access to clean water and over 400 million people in urban areas do not have clean air. (2) High economic cost: In 2004, environmental damages cost the equivalent of 3% of economic output. It would take US$135 billion to clean up the deteriorating environment, an equivalent to about 7% of GDP in that year. (3) High political cost: the devastating impact on the

5 environment has become the focus of growing local protests by disgruntled citizens. In 2005 alone, over 50,000 disputes were reported to different levels of government on violation of environmental regulations (Tong 2007; Zhang 2007; McKibbin 2006).

In India, CO2 emission per capita is low, compared with both the world average and China. Yet, its heavy dependence on coal for electricity generation contributes a higher share of CO2 emission (45%) among all sectors than the world average (41%). The speed of CO2 emission increase is much faster than the world‟s average. Currently, coal-fired generation contributes about 60% of the total greenhouse gases (GHG) emission in China and India. In the next 25 years, CO2 emission from the power sector will grow by 131% in developing countries, compared with only 10% in transition economies and 25% in the OECD. “China and India together account for 58% of the global increase in CO2 from power generation over 2004- 2030, because of their strong reliance on coal” (IEA 2006:144). In 2030, emission from power plants in China and India will be greater than those from power plants in the OECD. “Almost all of the increase in power-sector emission in China and India combined can be attributed to coal-fired generation, as opposed to about a third in other developing countries and 70% in the OECD” (IEA 2006:144). Nuclear power generation, or heat supply, does not cause emissions of such pollutants as SO2, NOx, and CO2, etc. Some studies have shown that to build nuclear instead of coal-fired generation capacity of 20GW by 2020 would mean a reduction of 136 million tons of CO2 emission per year. This would be equivalent to the entire commitment of the 25 EU countries to reducing emissions under the Kyoto Protocol (Jackson et al 2006; Victor 2006). But this would be less than 2.5% of the reduction in CO2 emission per year in China at the current level (6 billion tons in 2006).

Critics have emphasized the long-lasting environmental impact of nuclear energy for future generations. Scientists have demonstrated that spent fuel has 3 components: fusion fragments that may account to for 4% of the waste but are intensely radioactive and need to be isolated at least 500 years. One percent of the long-lived component has to be kept from the biosphere for hundreds and thousands of years, or be treated somehow to reduce the required isolation time, a technology yet to be developed. The rest is relatively less radioactive and can be stored. For China and India, however, the issue is to balance long-term vs. immediate environmental impacts. Nuclear power is one of the few energy sources that emit little air- pollution or GHG. The entire including mining of ore and the construction of power plants has been estimated to emit between 2.5 and 6 grams of carbon equivalent per kwh of electricity produced. Renewable sources (, hydro and ) generate about 10 times the GHG of nuclear power and coal-fired thermal generation plants using the current technology produce 50-60 times more GHG per kwh than nuclear power. The studies of IAEA have shown that the potential environmental and public health burdens from nuclear energy are about 5% that of thermal power (IAEA 1999; NEA 2007). It is a key political question for the governments in Beijing and Delhi: whether to reduce the human suffering now or worry about future potential risks.

Another aspect of environmental problems is social. The Chinese government has made a series of efforts to clean up the environment by closing energy-intensive industries, small- sized steel mills, cement plants, power plants and coal mines. This has never been successful partly because of the demand for their products but mainly because these small-scale operations tend to be located in poor regions, where the local economy depends on them. Instead of spending money and political capital closing down these industries, the government has committed to build NPPs to show the public that it was doing something for the people and the environment. Building NPPs is less politically sensitive than closing small

6 polluting power plants. In India, power losses (technical and commercial) run as high as 40%, worth about US$4 billion each year, according to the calculation of the World Bank, and $11.5 billion according to a recent study of the Planning Commission. Building NPPs offers the industry opportunities to improve efficacy by constructing integrated transmission networks that are necessary for NPPs to operate. It is something visible for which governments can claim credit. That is preferable to chasing electricity theft that is a common practice. In other words, it is easier for the government to defend general benefits than fight local cells of abusers.

Third, there is an optimistic view on nuclear development. Chinese scientists argue nuclear energy is “the sole energy that can substitute fossil [fuels] in a centralized way and in a great amount with commercial availability and economic competitiveness” (Wang and Lu 2002:8). A combination of domestic and foreign technology would allow China to build its nuclear energy capacity quickly. The official policy is to combine indigenous and imported mature technologies, designs and equipments in the first stage of nuclear expansion (up to 2010). It will then start large-scale expansion, which would bring down the cost of NPPs. In May 2007, China signed an agreement with the US to import 4 units of AP1000, Westinghouse‟s Generation III pressurized water reactors. The Chinese government created a new state- owned corporation, the State Nuclear Power Technology Corporation (SNPTC), to adopt, adapt and localise the General III technology for its own nuclear energy development. The State Council contributed 60% of the assets; the rest came 10% each from China National Nuclear Corporation (CNNC), China Electricity Investment Corporation, Guangdong Nuclear Energy Corporation, and China Technology Import and Export Corporations. China also decided to import 2 units of the French Areva‟s EPR, which are also General III PWRs. Importing foreign technology has been very controversial in China because China has imported a variety of foreign technology – the American, the French, the Russian and the Canadian CANDU. It also has wanted to develop its own. Standardisation and localisation of technology is the only way to reduce the cost and ensure the safety.

The confidence in India that nuclear energy will resolve some serious challenges is equally strong. In the Three Stage Development Strategy, the Indian government decided to install 20GW nuclear power capacity by 2020 with available technology. In the second stage, the country will build a chain of fast breeder reactors multiplying inventory along with power production. The Department of Energy has already obtained the approval of the government to construct the first 500MW Prototype Fast Breeder Reactor (PFBR), scheduled for completion in 2011. It is envisaged four more such units will be constructed by 2020 as a part of the programme. Subsequently FBRs will be the mainstay of the nuclear power program. In the third stage, India will utilize its abundant resources of thorium in fast or thermal critical reactors or the accelerator driven sub-critical reactors (ADS). A 300MW Advanced Heavy Water Reactor (AHWR), designed to draw about two-third power from thorium fuel, is under development and will provide experience in this technology. The Indian government has also argued that OECD countries should devote more resources to R&D in nuclear technology so that developing countries, such as India, can benefit. The government is confident that nuclear capacity will contribute a quarter of the total electricity generation in the country by the mid-century.

Both countries are also participating in a wide range of international collaborations. The most audacious international collaboration project is to develop fusion power under ITER. China and India are two of the 7 participating countries – the EU under the EUROTOM, the US, Russia, Japan and South Korea. The objective of the project is to support the safe,

7 sustainable, economic and proliferation-resistant use of nuclear technology to meet the global energy needs of the 21st century.

Fourth, for countries like China and India, political prestige is one of the determining factors for their nuclear energy strategies. This is a much stronger motive in India than in China, which is already recognized as a nuclear power. To many Indians, it is their „right‟ to develop nuclear capacity; accepting India as a nuclear power is a recognition of its “natural great- power status” (Thyagaraj and Thomas 2006:356). To some, being able to build NPPs is one way to “secure great power status” and boost “self-esteem” rather than deal with energy problems (Mehta 1998:403). In general, nuclear programs, military and civilian, have been as much politically and strategically as economically motivated. The often heard-argument is that if any country can have it, we should too. For these reasons, China and India developed their nuclear programs in the first place. The nuclear program in India goes back to the 1940s when the government created the Atomic Energy Commission in charge of the programs. It also built an elaborate organizational structure to ensure the supplies of financial, material and human resources in nuclear development. Its nuclear community is a strong advocate for developing indigenous technology and capacity and for expanding India‟s nuclear programs.

China used to have strong teams of nuclear physicists and nuclear engineers. The government is reviving its efforts to rebuild a team of experts for its nuclear expansion. In August, 2006, the Commission of Science Technology and Industry for National Defence released a report on nuclear development for the 11th five year plan (2006-2010) which highlighted the shortage of scientists due to the retirement and brain-drain of the younger ones. The creation of SNTC was a part of the overall strategy of nuclear expansion: building its own team of scientists in the field, developing advanced indigenous technologies and equipment, introducing the most advanced, mature and reliable technology currently embodied in the 3rd generation reactors, and monitoring international R&D.

Obstacles for Nuclear Expansion

Even with strong political will, both China and India face serious challenges in achieving the objective of building 40GW and 20GW respectively by 2020. Four main obstacles are in the way of a quick expansion of NPPs.

First, developing a next generation of technology remains the key for a rapid expansion of NPPs. GE, Westinghouse and are leading the way in developing the 3rd generation NPPs which will replace the Canadian CANDU that has dominated the field for a long time. China is developing the 4th generation technology as the Institute for Technology (INET) of Qinghua University built a 10MW high pressure gas pebble-bed test reactor funded by the „863‟ program. A pebble-bed reactor promises a better way to harness the atom. Through a joint effort between INET and China National Nuclear Power Corporation, with investment from a consortium led by the Huaneng Energy Group, China is building a larger (200MW) pilot reactor in Shandong province. According to the scientists at INET, the technology will be developed into the experimental stage until the mid century and become operational until the end of the century. Advanced technological R&D needs political and financial support. Spending on R&D was down until the late 1990s. Since then it has increased gradually. For example, between 1996 and 2003 China‟s R&D to GDP ratio rose from 0.6 to 1.3 percent. The government is no longer the sole provider of funding for R&D. The enterprise share of R&D spending has increased from less than 30% to about

8 60%. Yet, as research institutes become more market oriented, they become more concerned with immediate economic returns and less with exploring scientific innovation in risky and uncertain sectors such as nuclear energy (Foster 2006).

To achieve the objective, China would need at least 6,000 nuclear scientists and engineers by 2010 and 13,000 by 2020. Sixty percent of them would need bachelor degree, 30% master degree and 10% PhDs. Before the late 1980s, 27 universities offered undergraduate and post- graduate programs of nuclear sciences and engineering with 18 different specialties with an annual enrolment of 3000 undergraduates. There were also 22 technical training colleges. In the 1990s, nuclear sciences were considered out-of-date; universities closed departments and programs. In the past three years, annual enrolment in nuclear engineering was 372 as undergraduates and 145 as post-graduate with 403 undergraduates and 207 post-graduates in . The China Atomic Energy Authority has set targets for human development: 6,600 in nuclear engineering (2600 specializing in nuclear reactors, 2600 in radioactive, and 1500 in nuclear fuels), 5,000 in basic nuclear sciences (2400 in applying nuclear physics, 1300 in radioactive and environmental pollution and 1300 in other basic sciences), and another 1300 in geology by 2020. The shortage of skilled labour is particularly problematic in nuclear development. China Nuclear Engineering and Construction Corporation is the only company that can construct and install nuclear reactors and their auxiliary parts. Only two companies – CNNC and Guangdong Nuclear Power Corporation – are able to construct and operate NPPs, even though all five major power generation companies have tried to get into the nuclear development.

China also needs to train a large group of people to become regulators with both technical expertise and knowledge on regulation. To develop experts in nuclear science and engineering is part of the national strategy. Yet, to train this large number of scientists at the time when young people prefer to take subjects which would allow them to have easy access to job markets at high pay is a challenge and it will take time too.

Human capital is not such a serious challenge for India, which has a long history of nuclear research and development and has established research institutions devoted to R&D. Some in the field have argued that if scientists in India are given the same financial support as their counterparts in OECD countries, the Indian team could lead the world. In general, political and financial support has always been available for the nuclear scientists and engineers in India.

The second issue is finance. Most people agree that “nuclear power will succeed in the long run only if it has a lower cost than competing technologies” (MIT 2003:7). High initial costs in NPPs have always been posited as an argument against their development: (a) the initial investment in a NPP is about three times that of a thermal power plant; (b) its long construction period means that the costs are subject to the fluctuation of the financial market; (c) the costs of nuclear power are often calculated by including the costs of securing safety and while the cost of electricity generated with coal, oil and gas does not include environmental and other related costs; (d) until recently, prices of fossil fuels have been low; and (e) there seems to be abundant supplies of cheap fossil fuels. Despite the high investment costs and high financial risks in the initial stage, running costs are lower than all other types of electricity generation plants except hydro (MIT 2003).

Even by the most optimistic calculation, the initial investment cost in NPPs remains higher than other types of generation capacities. MIT suggested $1400-$2000 per kilowatt capacity.

9 IEA estimates it would cost $800-$1300 to build one kilowatt capacity in conventional coal- fired plants, $1300-$1600 in integrated gasification combined cycle (IGCC) and $1700- $2150 for nuclear power. To achieve the objective of 20GW by 2010 and 40GW by 2020, the initial capital costs would be at least $15 to $20 billion by 2010 and $43-62 billion by 2020. China is in a favourable position, at least for now. It has a large foreign reserve to purchase the most advanced technology, design and equipment. It has also had experience of combining various sources of financing – export credit from the supplier country, commercial borrowing in international financial markets, and domestic bank loans or credits (He et al 2000:181).

Not so in India. In the past five years, India has experienced very high economic growth (about 9% in 2006). Yet, it has been running trade, current account and budget deficits. Its budget deficits (4.3%) are particularly problematic because it exceeds the 3% threshold set by the EU. The combined budget deficit of the central and state governments was even higher, running up to 8% in 2006. This means constrained ability for government to invest in capital intensive nuclear power industry, which itself has limited capacity to invest due to high line losses. Another financial obstacle is the total amount of resources needed to invest in the power industry. According to the estimates of IEA and some international consulting firms such as KPMG, in the next five years, India will have to invest at least $120 to $150 billion in its power sector to meet the minimum demand of electricity. In a country where there are insufficient connection rates, normally 40% of the total investment would go to generation and 30% each to transmission and distribution. This would be translated into $48-60 billion for generation. If India installs 20GW nuclear generation capacity by 2020, as it plans, it will take approximately $350-400 billion. Getting sufficient investment is a daunting challenge and balancing the investment in various sources of generation is a political game. All interests will try to compete for a bigger piece of the pie

The third issue is uranium supply. Development of nuclear energy is preferred by many because of the relatively abundant uranium reserves in the world, estimated to last for 50-60 years. Unlike oil and , uranium deposits are spread among 40 countries. The price of is relatively low; it is easily transported and stored; and costs for facilities and management are also low. It is possible to purchase a great quantity of natural uranium for strategic reserves from the international market when the conditions are favourable. The storage cost of nuclear energy therefore is low. Yet, neither China nor India has adequate uranium reserves should they decide to expand their nuclear capacity significantly.

A recent report estimates that there are about 4.6 million metric tons of known and easily recovered uranium resources worldwide. The portions of the total in the three largest deposits are in Australia (23.1%), Kazakhstan (18.5%) and Canada (9.6%). China and India have only 1% each of these easily accessible resources. China currently produces between 700 and 800 tons of uranium a year and consumes about 1600 tons. An expansion of nuclear industry will require increased quantities of natural uranium – that is, if China is able to expand its nuclear generation capacity to 40GW by 2020, it would need at least 8000 tons of uranium, which can potentially be satisfied in three ways:

a. domestic production b. resource exploration and production overseas c. purchase from the international uranium market

10 China prefers to satisfy this growing demand predominantly from domestic production. It has already expanded uranium exploration in Yili Basin in northwest Xinjiang region and in the Ordos Basin in Inner Mongolia. It is suggested that China‟s own uranium supplies can meet the demand only until 2012. With new technology, equipment, material and increased funding, China‟s uranium production capacity may improve, which may convert reasonably assured resources (RAR) into mineable resources (Zeng and Zuo 2005:17-21). Yet, even by the most optimistic predictions, the domestic uranium supplies would be inadequate to meet the demand of nuclear expansion. To secure sufficient uranium from international markets and, if possible, to gain access to exploration and mining where resources exist, China has turned its attention to Australia and its large uranium reserves. The title of a newspaper article, „Let Australian Uranium Keep the Sky Blue in China‟, well illustrates the interests. Australia, however, has historically supplied its uranium to its allies: the US absorbs over 36% of Australian uranium export, EU 29%, Japan 24.5% and South Korea 9.1%. China is eager to ensure its access to these resources. In 2006, China agreed to pay between $600-700 million for 10,000 tonnes of uranium from Australia each year after 2010. Chinese companies have also come to Australia, hoping to invest in uranium mining.

Central Asia is another battlefield for competition, especially between China and Japan, for access to uranium. Kazatomprom from Kazakhstan started uranium exports to China in 2001. In August, 2006, the Japanese Prime Minister, Junichiro Koizumi visited Kazakhstan and Uzbekistan to discuss plans for uranium mines there. In April 2007, during a visit to Central Asia, the Minister of Industry indicated Japan‟s intention to expand uranium imports from Kazakhstan and Russia and engage in uranium exploration and mining in Uzbekistan. The Japanese trade minister stated that the government would support the Japanese companies in getting access to resources in Central Asia and elsewhere. “Competition from China will intensify in the coming years,” reasoned the Japanese government officials. “To boost energy security, what other options does Japan have except to approach other countries such as Kazakhstan” (Herald Tribune 11-4-07)?

Getting access to international resources takes time and requires long-term planning and well- planned strategies. Recent efforts by China to build close relationships with and pour huge funds to the continent can be partially explained by its desire to secure supplies of natural resources, including uranium. In 2006, it secured three licenses to explore and mine uranium in Niger. Even though China has recently secured several deals for uranium imports from Australia, Africa, Canada and the US, the rising concern about long-term energy security is explicit. The Chinese government in 2007 announced that the country planned to establish strategic uranium reserves to support its „massive expansion‟ of nuclear power. As some commentators point out: “with a lot of new nuclear power plants coming on line, they [the Chinese] are going to need nuclear fuel, so to get nuclear fuel, you need uranium” (Saiget 2007). After and grain, this is the third strategic reserve the government is committed to building.

Because of competition, not only among Asian countries but also the US and EU, in the past 6 years the price of uranium in the world market has multiplied by 16 times, from about $6 per pound for U3O8 in 2001 to $125 per pound in May 2007 (in the past 6 months along, the price doubled). Several developments may explain this record high price: (a) commitment to expanding nuclear capacities in many OECD countries and increase in strategic reserves; (b) sudden decline of production in Canada and Australia because of the natural disasters; and (c) other related reasons, such as changes in exchange rates and switch from one to another type of uranium in many importing countries (Steyn 2006; Kidd 2006). As fuel cost of NPPs may

11 account for between 7-10% of the total cost of nuclear-generated electricity, significant increases in uranium prices will be a factor for nuclear expansion.

India has a number of small to medium sized uranium deposits mainly in three provinces, Jharkhand, Andhra Pradesh and Meghalaya. Most of these deposits are low-grade. India has plenty of thorium reserves, but technology is not currently available for its safe application. Currently, India is entirely dependent on foreign suppliers for the used in its Tarapur reactors, which was originally provided by the US, and then by France, China and Russia. “Furthermore, it does not mine and mill enough natural uranium fuel for its existing PHWRs which require an estimated 480 tons of uranium annually (assuming 30 tons each for the 11 operational 200-220 mw reactors and 70-75 tons each for the two 540 mw reactors)” (Mistry 2006:678). Adding the demands for the NPPs under construction, India each year runs uranium deficits of about 75%, even though it stockpiled some when it had fewer reactors and reduced the operational capacity of the existing NPPs from about 90% to 80% in the past 7 or 8 years.

Currently, India is moving aggressively to double its reserves in the next 5 years, according to Secretary of AEC, Anil Kakodkar (Times of India 5-22-07). The country is also speeding up research on reprocessing technology to generate more fuel. As enriched uranium is being burned in today‟s reactors, the amount of U-235 in the fuel decreases while the amount of increases. Some countries, France and Japan for example, separate the plutonium from spent fuel, blend it with uranium from the same spent fuel, and use this „mixed oxide fuel‟ or MOX in their reactors. This can increase the energy for the given amount of enriched uranium fuel by about 30%. Both China and India have been able to do so, on a trial-run basis. Despite all these efforts, India would only be able to expand its nuclear power capacities if it is accepted into the international nuclear regime by obtaining some kind of waiver or bilateral agreements as negotiated between India and the US, which is highly contentious domestically and internationally (Tellies 2007; Energy Security Insights 2006).

The fourth issue concerns international regulations for the safety of civilian NPPs and proliferation. This is the most politically sensitive issue for India. There is no proliferation proof nuclear fuel cycle. Nonetheless, preventing the proliferation of nuclear weapons must be an important goal of the international community. Achieving this goal becomes more complex in a world with a much expanded nuclear-energy program involving more countries and when all technologies are for dual use – military and civilian. The Global Nuclear Energy Partnership (GNEP) proposed by the Bush administration was designed to promote expansion of NPPs while controlling distribution of nuclear power technology and materials to prevent proliferation of nuclear weapons. The US wants GNEP to organize countries that have secure, advanced nuclear capabilities to provide fuel to other countries which agree to use nuclear energy just for power generation under the aegis of IAEA. In exchange, the fuel purchasers would renounce plans to enrich and recycle fuel.

Many have considered this as a good option for user countries, especially the small ones. They would not have to build enrichment facilities nor treat or dispose of spent fuel. In return, user countries would give up potential access to weapon-usable material from both the front and back ends of the fuel cycle. This is an easy choice for the supplier countries, most of which are democratic. The five major nuclear powers, Britain, China, France, Russia and the US, have no problems with the plan either. Others object, especially India which is determined to fight discriminatory treatment. Because China has had a very poor record on transferring technologies and materials to others, especially Pakistan, India often asks: „why

12 can China be trusted, but not us‟? Those who insist on the strict implementation of NPT often refer to two developments: (a) India‟s initial breach of bilateral agreements with Canada and with the US in the 1960s, using the imported nuclear technology and enriched uranium to develop its first bomb; and (b) the fact the India is not a member of NPT. For this particular reason and others, the US proposed the bilateral agreement to provide India with a waiver.

India demands it be allowed to control its own destiny in nuclear development. It argues that India should be able to import nuclear technology, material and equipment from others „without compromising its sovereignty and strategic interests‟. According to IAEA and IEA, expansion of nuclear power is centred in Asia. Of the 26 new reactors under construction, 16 are in Asia. Twenty-four of the last 34 to come on-line are in Asia. Japan has the world‟s third largest nuclear generation capacity (48GW), following France (63GW) and the US (99GW). Uranium requirements are expected to grow significantly in East Asia.

Finally, the question of whether China and India can expand their nuclear energy capacity fast enough to meet demands and abate environmental pollution depends on domestic politics. Recent debates over the US-India nuclear agreement reflect some of the controversies (Tellis 2006; Mistry 2006). The debate, however, has been conducted very much among Indian elite – the nuclear community, different political parties and foreign policy makers. One of the fault lines of the debate is between the military segment of nuclear power and civilian energy experts. Once nuclear energy programs expand, it then will face more challenges from the public. Land acquisition for NPPs is already an issue. When NGOs could stop a coal mine project financed by the World Bank in West Bangle, it is not difficult to vision the potential public opposition to NPPs.

Recent developments in China may be a better example of the force of public perception. The public in general remains silent on the issue, leaving the discussion to the professionals, but not because of the secrecy or repression. Their views are known. The Institute of Nuclear and New , Qinghua University, conducted surveys between 2002 and 2006 on public opinion toward nuclear energy expansion. It showed about 80% of people supported nuclear energy expansion and the rate of support was higher in 2004-06 than in the first two years. Another survey showed that over 76% of the people had only heard of nuclear energy in general terms but had no detailed knowledge on nuclear power (CAIN 2006). Lack of knowledge is often seen as the key to opposition to nuclear development in OECD countries, with emotion rather than rationality dominant. In China, this lack of knowledge of nuclear power, together with widespread concerns about environmental pollution and energy shortages may explain the broad support for nuclear energy. Yet, another set of data shows that this consensus could easily disintegrate and the public could turn against, and even stop, nuclear development. When asked about whether they would support a NPP in their own region, less than 50% of the people gave a positive answer. As the country develops, the middle class expands and information technology is widely used, it is conceivable that people could be organized to raise their existing concerns over NPP projects or to stop a project. Politics is no longer the same in China and public opinion can no longer be totally ignored.

Conclusion

Nuclear energy programs in China and India will undoubtedly expand. It remains to be seen in what manner and at what speed this expansion takes place. The twin challenges of rising energy demands and increasing environmental pollution caused by burning provide

13 strong incentives for governments in Beijing and Delhi to look to nuclear power as an option to supplement their current energy mix. Yet, it provides no easy answer. The challenges of obtaining sufficient financial and human capital, securing adequate supplies of uranium and technology, and addressing domestic and international concerns about safety and proliferation are equally daunting for both countries. They all must be addressed if either country is to achieve its ambitious goals for nuclear power.

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